Powell Says Archegos Collapse Revealed Breakdowns at Some Banks

Federal Reserve Chairman Jerome Powell said the central bank is examining the Archegos Capital Management blowup because it revealed risk-management failures at a number of banks his agency supervises.

“It seems as though there were risk-management breakdowns at some of the firms -- not all of them -- and that’s what we’re looking into,” Powell said at a press conference Wednesday. He also defended the Fed’s role as an industry supervisor, saying his examiners aren’t responsible for taking control to stem losses by lenders. “We don’t manage their companies for them,” he said.

The collapse of trader Bill Hwang’s firm continues to reveal losses by some of the world’s biggest lenders and cost some executives their jobs. More than $10 billion in losses at major banks including Credit Suisse Group AG, Nomura Holdings Inc., Morgan Stanley and UBS Group AG sent shock waves through the industry and has drawn attention from U.S. regulators.

The Archegos exposures weren’t well understood by some banks, Powell said, adding that it’s “troubling” in an aspect of banking that’s supposed to carry clear risks.

While that revealed a failure in bank controls, “Archegos risks were not systemically important or were not of the size that they would have really created trouble for any of those institutions,” he told reporters.

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